In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 3 Aug 2018
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Americas: pushing the limits

This week it finally happened. Silicon Valley giant Apple became the first US company to have a stock valuation of over $1 trillion. The company’s recent decision to sell its signature iPhone at a price point of around $1,000 has played a part in pushing the stock price to over $200, following better than expected sales.

Other news in Silicon Valley saw the Office of the Comptroller of the Currency give fintech companies its permission to make applications for a special banking charter. The news, which came hours after the Treasury released a fintech report, will allow these companies to become banks should they so wish, but given the likelihood that state regulators will launch a renewed push to appeal the decision, there is unlikely going to be much action for the next few months at least while companies weight up their options. 

Last month the AT&T-Time Warner trial looked done, but this week it opened right back up again. On Wednesday the judge who gave the ruling decided to allow the court transcripts to be reopened following a successful appeal from the government, who appear set to derail the mega merger on antitrust grounds. 

No weekly roundup would be complete without a mention of President Trump and his favourite new toy, export tariffs. After forming an unlikely alliance with the European Union last week, Trump reinforced his desire to place a whole new round of tariffs on Chinese imports this week – leading to renewed concerns. 

Asia Pacific: pushing forward

Hong Kong’s Securities and Futures Commission has made amendments to the Codes on Takeovers and Mergers and Share Buybacks. The changes include increasing the voting approval threshold for whitewash waivers to 75% and empowering the Takeovers Panel to require compensation to be paid to shareholders who have suffered as a result of a breach of provisions to the Takeovers Code.

The Hong Kong Monetary Authority (HKMA) released conclusions on the public consultation relating to rules prescribing loss-absorbing capacity (LAC) requirements to be made as subsidiary legislation under section 19(1) of the Financial Institutions (Resolution) Ordinance (Cap. 628). The proposal is that authorised institutions whose failure could pose a risk to the financial system in Hong Kong should be required to have sufficient LAC to facilitate their orderly failure, should they reach the point of non-viability. 

Continuing its efforts to liberalise capital markets, China is planning to resume normal trade in stock index futures. Strict requirements on stock index futures trading were put in after the 2015 stock market crash. Fang Xinghai, vice chairman of the China Securities Regulatory Commission also said that regulators would continue to work towards giving commercial banks more access to China’s bond futures market.

The Asian Corporate Governance Association has released its report on corporate governance in China. It provides an overview, challenges and recommendations on improving the role of Party organisations, boards of directors, supervisory board, independent directors and audit committees in China.

EMEA: hard pushed

Buyside firms will be directly concerned by initial margin rules in September. This may impact derivative pricing and volume ahead of 2020 when all counterparties trading over-the-counter derivatives are included within the rules, and force upward pressure on prices. One of the major challenges is that these smaller firms, which will be included from September, don’t have the same knowledge than those firms that are already subject to the rules and have already had a year and a half of experience, putting a strain on limited resources.

Germany is yet another country to intervene in a merger, following its decision to block a Chinese company’s takeover of Leifeld Metal Spinning. This comes only a week after the government instructed state-owned bank KfW to buy 20% of network operator 50Hertz to block State Grid Corp of China’s bid. This is part of a growing trend globally, following political successes of protectionism, making it increasingly difficult for foreign assets to acquire targets. 

Utility tokens are in desperate need of regulatory clarification and more coin offerings are being structured as a hybrid of security and utility tokens to include both institutional investors and retail investors. Security tokens would not allow retail investors unless a prospectus is published and approved, which is yet to happen. Therefore, issuers are increasingly adopting a two-tiered approach. Unfortunately, it is not clear precisely what constitutes a utility token yet, and with Securities and Exchange Commission chairman Jay Clayton claiming that every offering he has seen is a security, clarification is needed soon. 

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